ࡱ> acb#` .^bjbjmm 1bC/Aa" ###8 $LV$4 }/$$$$$$$$.......$o0h2.9'$$''.$$7/,,,'$$.,'.,,:D-,-$$ j^#^(p- .4M/0}/z- c3(.c3-c3- $Z%|,%d:&T$$$..,j$$$}/''''   DN   N    SUBJECT TO CONFIDENTIAL TREATMENT UNTIL February 6, 2007 STATE OF MAINE PUBLIC UTILITIES COMMISSION January 24, 2008 CORRECTED Order Designating Standard Offer Provider and Directing Utility to Enter Entitlements Agreement MAINE PUBLIC UTILITIES COMMISSION Docket No. 2007-463 Standard Offer Bidding Process For Residential and Small Business Customers BANGO HYDRO-ELECTRIC COMPANY Docket No. 2007-526 Request for Approval of Request for Bids Pursuant to Chapter 307 and Associated Waivers ADAMS, Chairman; REISHUS and VAFIADES, Commissioners I. SUMMARY Through this Order, we designate Integrys Energy Services, Inc (Integrys) as a standard offer provider for the residential and small non-residential class in the Bangor Hydro-Electric Company (BHE) service territory. Integrys is designated to provide standard offer service to 33% of the load for a one-year period beginning March1, 2008. The resulting overall price for standard offer service for the one-year period beginning March 1, 2008 will be $0.100480 per kilowatt-hour. The Integrys standard offer bid was linked to its bid to purchase certain of BHEs non-divested entitlements to energy and capacity. BHE is directed to sell these entitlements to Integrys for a oneyear period beginning March 1, 2008, as specified in the Integrys linked bid. II. BACKGROUND Pursuant to fb88s Restructuring Act, the Commission periodically administers a competitive bid process to select providers of standard offer service. 35-A M.R.S.A. 212(2). The Commission is also required by the Act to oversee the sale by utilities of the rights to energy and capacity from their non-divested entitlements and other non-divested generation-related assets. 35-A M.R.S.A. 3204(4). Since the standard offer service term beginning March 1, 2005, the Commission has segmented the standard offer load for the residential and small non-residential classes as a means to reduce the potential for large price swings. Thus, the Commission ultimately adopted a procurement schedule in which a supply for a third of the load is obtained each year pursuant to three-year arrangements. The Commission continued its practice of allowing bids for standard offer load to be linked to obtaining the output of utility non-divested entitlement contracts. In order to permit linked bids for each of the three segments of load, the Commission directed BHE to segment the sale of the output of non-divested entitlement contracts into pre-specified groups of entitlement contracts. As one 33% segment to serve standard offer load and BHEs resale of its PERC entitlement expire on February 29, 2008, the Commission issued a RFP for 33% of BHEs small classes standard offer load on October 9, 2007. Order Approving Request for Standard Offer Bids, Docket No. 2007-463 (Oct. 9, 2007). On the same day, the Commission approved and BHE issued a RFP to re-sell its PERC entitlement. Order Approving RFB and Granting Waivers, Docket No. 2007-526 (Oct. 9, 2007). In its October 9 RFP, the Commission decided to seek terms of service for less than three years. The Transition Period of the ISO-NE Forward Capacity Market (FCM) concludes on May 31, 2010. During the Transition Period, all listed ICAP resources will receive a monthly capacity payment based on a fixed payment rate that is adjusted for each Power Year. Because of the uncertainty of prices in the FCM after the Transition Period (the first auction of the FCM for capacity on and after June 1, 2010 has not yet occurred, the Commission decided not to seek bids that would extend service beyond the end of the Transition Period. Accordingly, the Commission sought bids for one and two year terms beginning on March 1, 2008. As directed by the Commission, BHE sought bids to purchase its PERC entitlement for identical terms. Pursuant to the RFPs, indicative pricing was due on November 6, 2007. Based on the indicative pricing, a subset of bidders was selected for discussions on non-price items and such discussions have occurred among our staff, BHE and the selected bidders. Upon the conclusion of these discussions, bidders were requested to present final, binding bids on January 23, 2008. III. DISCUSSION We note at the outset that both the standard offer and entitlement sale bid processes were very competitive with the result being that standard offer prices and sale prices for utility entitlements have been established by a competitive market as contemplated by the Restructuring Act. As mentioned above, we asked for one-year and two-year bids. We decide to select bids for a one-year term rather than a two-year term. As a consequence of our decision to not seek three-year bids, we must seek bids for two-thirds of the small class standard offer load either next year or the year after. The Commission has appealed the FERCs decision to implement FCM payments during the Transition Period, and if we accept a two-year bid, we would lock in another year of standard offer prices that assume the Transition Period FCM prices and reduce the impact of a successful appeal. Furthermore, the world capital markets anticipate a softening of the United States and world economies in the coming months. Fossil fuel prices, including natural gas, have increased steadily for the past four years. Generally, fossil fuel prices tend to decline as the economy slows. For these two reasons, we decide that we should seek the larger portion of standard offer load one year rather than two years from now. Accordingly, we consider only one-year bids. Upon review of all the bids and the selection criteria in Chapter 301, we conclude that the Integrys linked bids provide the greatest value for ratepayers. We, accordingly, designate Integrys as the standard offer provider for 33% of the BHE residential and small non-residential classes for a one-year period beginning March 1, 2008 and direct BHE to enter into entitlement agreements according to the Integrys linked bid. Based on our decision today, the overall standard offer price for the BHE small class for the one-year period beginning March 1, 2008 will be $0.100480. This represents a blended price of this years winning bid for 33% of the load and the winning bids for 67% of the load in the prior two years. The average entitlement sales price for the PERC entitlement over the one-year period is approximately $0.07264 per kilowatt-hour. In designating Integrys as a standard offer provider, we accept its statement of commitment and bidder conditions. Both documents are attached to and incorporated into this Order. We find that these documents provide useful clarifications as to precise nature of the standard offer provider obligations, as well as reasonable protections for the provider with respect to actions of the fb88 Legislature, this Commission or the utility. We understand all conditions of the winning bidder are satisfied or will be shortly after the issuance of this Order. We are informed that the modified Standard Offer Provider Service Agreement that was attached to winning bid is acceptable to BHE and we concur that the changes from the standard form are reasonable. We also find that the security presented by Integrys as part of the linked standard offer proposal is reasonable and consistent with our rules and the RFP. The security covers both the standard offer and entitlement obligations and includes an initial corporate guarantee. To the extent customer exposure increases above Credit Rating Threshold amounts stated in the Comprehensive Credit Support and Final Settlement Calculation Agreement as a result of changes in market prices, Integrys is required to post additional security in the form of a letter of credit or cash. A letter of credit or cash could also be required if the credit rating of the guarantor decreases. Finally, we recognize that the linked standard offer and entitlement arrangements approved in this Order create certain obligations and risks for BHE that should be properly borne by customers rather than shareholders. We are informed by our staff that BHE agrees to accept the obligations and risks as long as it is compensated for the financial consequences of satisfying those obligations. Therefore, we explicitly find that any direct or indirect costs, obligations, expenses or damages reasonably incurred by BHE, including administrative and security costs, in fulfilling its obligations or exercising its rights under the various contracts and arrangements authorized by this Order shall be deferred on the utilitys books of account as regulatory assets and shall be fully recovered, with carrying costs, from customers either through transmission and distribution rates or standard offer rates. These risks include, but are not limited to: The costs of any performance assurance that BHE may be required to provide a counterparty under the arrangements; Any provision that allows for a decrease or offset to the entitlement sale price, such that BHE collects from buyer any amount less than the entitlement sales price approved in this Order, including such decreases or offsets arising from actual or alleged changes in law or regulation; Any additional costs or losses that BHE may incur as a result of tolling any termination rights under any agreement pending the outcome of an arbitration proceeding; Any costs caused by contractually fixing any fees applicable to the standard offer provider for any period time, where such fees are otherwise subject to change; Any incremental costs attributable to the execution of the linked standard offer arrangements, including those related to the solicitation, evaluation, and negotiation of those arrangements; and Any costs or losses that BHE incurs as a result of a default by Integrys on any of their contractual or other obligations and the consequential termination of any contract or obligation associated with the linked standard offer and entitlement arrangements authorized in this Order for which BHE is not compensated by associated security. This Order will be treated as designated confidential information pursuant to the Protective Order issued in this proceeding for a two-week period. After that, the confidential treatment of this Order will be removed. Dated at Augusta, fb88, this 24th day of January, 2008. BY ORDER OF THE COMMISSION _______________________________ Karen Geraghty Administrative Director COMMISSIONERS VOTING FOR: Adams Reishus Vafiades NOTICE OF RIGHTS TO REVIEW OR APPEAL 5 M.R.S.A. 9061 requires the Public Utilities Commission to give each party to an adjudicatory proceeding written notice of the party's rights to review or appeal of its decision made at the conclusion of the adjudicatory proceeding. The methods of review or appeal of PUC decisions at the conclusion of an adjudicatory proceeding are as follows: 1. Reconsideration of the Commission's Order may be requested under Section 1004 of the Commission's Rules of Practice and Procedure (65-407 C.M.R.110) within 20 days of the date of the Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought. 2. Appeal of a final decision of the Commission may be taken to the Law Court by filing, within 21 days of the date of the Order, a Notice of Appeal with the Administrative Director of the Commission, pursuant to 35-A M.R.S.A. 1320(1)-(4) and the fb88 Rules of Appellate Procedure. 3. Additional court review of constitutional issues or issues involving the justness or reasonableness of rates may be had by the filing of an appeal with the Law Court, pursuant to 35-A M.R.S.A. 1320(5). Note: The attachment of this Notice to a document does not indicate the Commission's view that the particular document may be subject to review or appeal. Similarly, the failure of the Commission to attach a copy of this Notice to a document does not indicate the Commission's view that the document is not subject to review or appeal. The Order issued on January 23, 2008 remains operative. This Corrected Order is issued to correct two misstatements in in the January 23rd Order. The new text to correct the misstatements is noted in bold and is explained in new footnotes. In addition, clarifying language is added to the second full paragraph on page 4 at the request of Integrys. The new language clarifies that the specified threshold amounts are stated in the Comprehensive Credit and Final Settlement Calculation Agreement, an agreement that BHE agrees that it will enter into with Integrys. The January 23rd Order stated that Integrys was designated to serve one-third of the load for this class. Our RFP and the SOP Agreement correctly reflect the 33% number. As noted in Supplemental Order issued in last years bid process for this class, CMP and BHE billing systems require whole number percentages (Docket No. 2006-591, Feb. 27, 2007). There were a number of references to one-third that need to be corrected in this Corrected Order.  The January 23rd Order incorrectly stated the year as 2009.  The entitlement prices in the accepted linked bid are h(012789goqwx + , / }  - ; < = ̶vllbllXlXlh9OJQJ^JhK.OJQJ^JhsOJQJ^JhG3;OJQJ^Jh\hy%_5OJQJ^J"jhy%_0J5OJQJU^Jhy%_5OJQJ^Jhy%_OJQJ^JhG3OJQJ^JhshPCh9hG3h_%5OJQJ\^JhG35OJQJ\^Jhs5OJQJ\^JhG35\^J"(9:Ixy0 S | }   = ^` ^`gdy%_gdy%_$a$$a$8]-^= > ? K L F G V W  I!``gd`gd ~ 7$8$H$gd^ $&d P a$= > ? 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Thus, the choice of the winning linked bid does not provide any advantage to the small class customers over utility customers more generally and actually works to reduce stranded costs for all of BHE ratepayers.  To the extent necessary, we waive the procedural requirements of Chapter 307 (pursuant to section 11 of the rule) so as to allow the utilities to enter into the entitlement agreements as directed.     Docket No. 2007-463 Order Designating . . . -  PAGE 2 - Docket No. 2007-526 ]]]]]]]]]^ ^^^^^^(^*^+^,^-^.^ĴĞĴٴٚhG3OJQJhX%*hX%0J5>*OJQJ\^JmHnHuhX%0J5>*OJQJ\^J(jhX%0J5>*OJQJU\^JhX%5>*OJQJ\^JhX%5OJQJ\^Jjh_Uh_/ 01h/ =!"#$% @@@ NormalCJ_HaJmH sH tH F@F Heading 1$@&5OJQJ\^JDA@D Default Paragraph FontVi@V  Table Normal :V 44 la (k@(No List >@>  Footnote TextCJaJ@&@@ Footnote ReferenceH*2@2 TOC 1 OJQJaJ4@"4 Header  !.)@1. 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Tannenbaum James Buckley  Oh+'0  $0 P \ h tSTATE OF MAINEMitchell M. TannenbaumNormalJames Buckley4Microsoft Office Word@F#@GQ^@qq^@ҞK^ 6(՜.+,0 hp   fb88 PUCU+/' STATE OF MAINE Title  !"#$%&'()*+,-./013456789:;<=>?@ABCDEFGHIJKMNOPQRSUVWXYZ[^Root Entry Fj^`1Table2w3WordDocument1bSummaryInformation(LDocumentSummaryInformation8TCompObjq  FMicrosoft Office Word Document MSWordDocWord.Document.89qRoot Entry FD^e1Table2w3WordDocument1bSummaryInformation(L  !"#$%&'()*+,-./013456789:;<=>?@ABCDEFGHIJKMNOPQRSdDocumentSummaryInformation8xCompObjq  FMicrosoft Office Word Document MSWordDocWord.Document.89q՜.+,D՜.+,D hp   fb88 PUCU+/' STATE OF MAINE Title4 $,